Clear signs this week that investor demand is spreading beyond prime. At the same time the world’s wealthiest families are piling into property. The consequences of these parallel trends will be profound.
Regions and stock that until recently would have been sniffed at are suddenly starting to appeal to international investors. Middle Eastern wealth is looking beyond the West End and to the South East. Eight deals worth nearly £140m were completed in 2013. That was more than twice 2012’s total, a number Colliers International expects to top £200m in 2014.
Meanwhile, the latest ULI/PwC Emerging Trends in Real Estate report highlights how investors are turning to regional cities, secondary property and recovering markets such as Ireland and Spain.
It is little surprise; 59% of respondents to the ULI/PwC survey said prime property in Europe’s core markets was now over-priced. The Middle Eastern investors piling into the South East are looking for yields of 6%-plus, which are now all but impossible to find in central London.
In the background has been a colossal land grab by private wealth. Property now accounts for around a fifth of the invested wealth of the world’s nearly 200,000 ultra-high-net-worth individuals. Together, by value, they own around 3% of the world’s total real estate. Yes, it’s mostly luxurious homes, but that is changing.
Savills, author of Around The World In Dollars And Cents with researchers from Wealth-X, estimates that around 35% of global deals worth more than $10m (£6m) in 2012 were only possible because of private funding. The use of private equity in major property deals worth at least $10m has nearly trebled since 2009.
What all this means for real estate remains to be seen.
This fabulously wealthy cabal will only grow in number – by a fifth by 2018, according to Wealth-X. They may well hold assets for longer than institutional investors. That could hurt the adviser community. Their willingness to go up the investor risk curve, deeper into real estate and beyond prime, is likely to increase. Competition for prime assets has already driven institutional investors into non-prime markets. Greater competition for secondary may drive them to fresher pastures still.
¦ Boris Johnson this week raised the minimum target for housing delivery in London by 100,000 over the next decade. He wants 42,000 homes to be built each year in the capital, a full 10,000 homes less than CBRE’s annual expectation and 20,000 less than the mayor’s own housing demand forecasts.
Targets matter much less than delivery, however. And with Estates Gazette’s London Residential Research showing just 25,000 homes were completed in London last year, the problem is growing in severity with little prospect of change.
¦ If there was an award for the best-kept secret in property it would unquestionably go to the team behind Tomorrow, the new codename for the project being led by a consortium of global tech firms in Manchester.
You may know it by its previous moniker, Project Digital. But whether it’s Tomorrow today, or Project Digital yesterday – do keep up – the degree to which details are being kept under wraps is perhaps unprecedented. Especially when you consider the consortium – which is working on next-generation cloud computing and holographic modeling – is looking for as many as 30 sites in the city. More details are expected in the coming months, with an extended requirement in London mooted too. How much longer can details stay under wraps?
¦ Speaking of awards, this year’s Property Marketing Awards are now open for entries. Supported by Estates Gazette, this year sees new categories and promises to come with even more pomp and ceremony. For more on the event, run by the Worshipful Company of Chartered Surveyors, click here.
Damian.Wild@estatesgazette.com
